Want to jump straight to how to trade cryptocurrency? You can trade crypto on eToro (great for U.S. and Non-U.S traders), Plus500, Robinhood, Coinbase and Uphold!
If you have followed the news over the past few years, you have inevitably come across cryptocurrency at some point or another. This relatively new asset has made waves in several industries, leading many to make large profits. Additionally, some believe that the cryptocurrency industry is just getting started. If this is the case, there is potential for even more growth and returns on investments. Let’s take a look at how you can start investing in crypto today.
How to Trade Cryptocurrency
1. Open a Cryptocurrency Brokerage Account
The first step in owning crypto is to create an account on a crypto brokerage. These are sites that work similarly to stock brokerages but specialize in crypto. eToro, Coinbase, Kraken, and WeBull are some of the best sites for this purpose.
With a brokerage selected, you can sign up using an email and password. The exchange will then likely ask for some personal information, such as your Social Security number, driver’s license, etc.
2. Fund Your Account
Once you’ve signed up with a crypto brokerage, you’ll need to connect your bank account. Most crypto brokerages offer bank funding through debit cards and wire transfers. ACH deposit (linked bank account transfer) is typically your cheapest option to fund your account, and it’s free on most platforms.
3. Choose a Strategy
Before you start making trades, it is important to have a set trading strategy so that you have a greater chance of profiting. For beginners, you can purchase a trading course or find other introductory trading resources on the web.
There are also a handful of day trading strategies that traders can use to make their trade ideas that can be personalized to their own goals and risk tolerances.
4. Consider Automated Crypto Trading
When you seek out a crypto trading strategy, you might try automated crypto trading. Trading bots enact a strategy that is intended to give you the best results given your investment goals. Because automated trading can provide you with a conservative, neutral, or aggressive method, you can make money quickly, hold your coins, or diversify your portfolio.
You might also consider actively trading cryptocurrency on some platforms while using automated trading with others.
5. Make Your Purchase
With a selected strategy and a funded account, you can begin allocating your funds into different tokens. To simply buy a token, you can search for it on the site, select the “Buy” button, and enter the amount to purchase.
Additionally, with tokens in your portfolio, you can store them in a variety of places. You can keep them on the exchange, but a wallet is likely a safer choice. There are software wallets, such as Coinbase Wallet, that store the private keys needed to send crypto online and give you full discretion over your tokens. Hardware wallets, such as Ledger, are even safer, storing the private keys in a physical device that must verify all transactions.
Compare Cryptocurrency Brokers & Exchanges
With tons of crypto brokers to choose from, it can be a bit overwhelming to single in on one. However, eToro and Coinbase have set themselves apart from the competition in terms of ease of use, security, and low fees.
What is Cryptocurrency and How Does It Work?
Cryptocurrency uses blockchain technology to allow for peer-to-peer (P2P) transactions. Blockchain is a ledger that stores information on all transactions and is publicly viewable. The ledger is immutable and decentralized, meaning that it cannot be altered, and it is not owned by any single person or entity. This creates numerous benefits for the users of crypto:
- There are oftentimes smaller fees on transactions
- More security and less risk of hacks
- Coded token supply allows for stability
- Faster transaction speeds
- Accessibility for those without access to traditional banking
- Privacy of transactions and holdings
These are just some of the benefits that arise from a decentralized and immutable ledger. However, within crypto, many different types of tokens serve different purposes. For example, Bitcoin is seen as a store of value due to its capped supply, while ethereum is more of a means to access other projects on Web3. While there are tons of uses for crypto, they all still rely on the basic building blocks of blockchain.
What is Crypto Trading? Why Is It Different From Stock Trading?
Crypto trading refers to the buying and selling of cryptocurrencies, such as Bitcoin, ethereum, or Ripple, on various cryptocurrency exchanges. Traders aim to profit from the price movements of these digital assets by analyzing market trends, patterns, and news events. It differs from stock trading in that there are fewer regulations surrounding trading, more assets available to invest in, and it is open 24/7.
Here are some popular crypto trading strategies that traders can consider implementing:
- Day Trading: this involved buying and selling tokens within the same day to capitalize on intraday price movements. This usually requires trades to make quick decisions and search for opportunities in the market.
- HODLing: A term created by the crypto community, HODL stands for “hold on for dear life,” a strategy in which traders buy a token and hold it throughout price fluctuations.
- Swing Trading: Similar to day trading, swing trading is when investors buy and sell tokens for days or weeks to take advantage of larger market sentiment.
How To Analyze The Crypto Market?
Crypto markets are extremely volatile and can move very quickly. Because of this, it is very important to stay on top of all the news and updates that come from the tokens you are trading. There are a variety of ways to do this, including tracking sentiment on X and other social media, reading crypto news each day, talking with other traders on social platforms such as eToro, etc. These are places where you can potentially find news that will move the markets before it becomes priced in.
While there are tons of ways to stay up to date, Benzinga offers a ton of resources to help retail traders succeed in fast-paced markets.
How to Select Investments When Trading Crypto
Here are some of the top things to look for when investing in crypto:
- Risk Tolerance: Some cryptocurrencies can be riskier than others, so it is important to understand how volatile a specific token is before investing.
- Security: Some projects place a strong emphasis on security. This is usually a good thing, as it points to a potential for increased adoption in the future.
- Diversification: Creating a diverse portfolio can help mitigate risks from any single token and potentially increase returns. You can create a diverse portfolio by investing in many different tokens across many different aspects of crypto.
- Liquidity: It is important to be able to exit a trade when you would like to. This requires a liquid token, meaning that there are strong trading volumes to help buyers and sellers meet on a price. This can help you get higher profits and smaller losses.
- Roadmap: Many projects have a road map that details the plans for the future. Analyzing this road map can help you get a sense of what the project has in mind and what an investment could look like.
Pros and Cons of Investing in Cryptocurrencies
Pros
- Potential Returns: Crypto has performed very well in the past, which could point towards further gains in the future.
- Diversification: Even if you invest a small amount, crypto can still help diversify your entire portfolio.
- Control: You can have complete control over your portfolio if it is in a wallet. This eliminates the risk of a company failing or going bankrupt.
Cons
- Risk: While crypto can provide huge returns, it can also lead to large losses.
- Regulation: Crypto regulation is still under development and could change in the coming months and years. This could drastically affect the trading environment.
- Market Manipulation: Due to the lack of regulation, pump-and-dump schemes are common in crypto and can lead to investment losses.
Frequently Asked Questions
How to trade crypto for beginners?
To trade crypto, open an account on a brokerage, fund the account, and then start making trades.
Can you make $100 a day with cryptocurrency?
Yes, but you will likely need a large amount of upfront investment and a very solid trading strategy.
How does crypto work for beginners?
Crypto uses an immutable and decentralized ledger to store data and transaction history.
How to trade cryptocurrency and make a profit?
There are a handful of trading strategies that can be profitable, such as the Elliott Wave, RSI, Bollinger Bands, etc.
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About Caden Pok
Caden has been involved with crypto since 2018, when he began investing, trading, and mining tokens. He took part in undergraduate research studying cryptoeconomics at the University of Michigan, where he will graduate Phi Beta Kappa with a bachelor’s in economics in 2025. He is experienced with DeFi technology and multiple blockchains, currently investing in Ethereum and Bitcoin.